The latest analyst coverage could presage a bad day for Foshan Electrical and Lighting Co.,Ltd (SZSE:000541), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with the analysts seeing grey clouds on the horizon. At CN¥5.61, shares are up 4.1% in the past 7 days. Investors could be forgiven for changing their mind on the business following the downgrade; but it's not clear if the revised forecasts will lead to selling activity.

After the downgrade, the five analysts covering Foshan Electrical and LightingLtd are now predicting revenues of CN¥11b in 2024. If met, this would reflect a decent 17% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to surge 28% to CN¥0.24. Before this latest update, the analysts had been forecasting revenues of CN¥13b and earnings per share (EPS) of CN¥0.32 in 2024. It looks like analyst sentiment has declined substantially, with a substantial drop in revenue estimates and a large cut to earnings per share numbers as well.

It'll come as no surprise then, to learn that the analysts have cut their price target 22% to CN¥7.10.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Foshan Electrical and LightingLtd's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 17% growth on an annualised basis. This is compared to a historical growth rate of 25% over the past five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 18% annually. So it's pretty clear that, while Foshan Electrical and LightingLtd's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Lamentably, they also downgraded their sales forecasts, but the business is still expected to grow at roughly the same rate as the market itself. After such a stark change in sentiment from analysts, we'd understand if readers now felt a bit wary of Foshan Electrical and LightingLtd.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. At Simply Wall St, we have a full range of analyst estimates for Foshan Electrical and LightingLtd going out to 2026, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.